UK: Jones v Kernott — A Case Of Clarification Or Not?

Property ownership issues for cohabiting couples

The Supreme Court has recently handed down its much anticipated
judgment in the case of Jones v Kernott [2011] UKSC 53. The case is
notable because it deals with the ownership of property between
non-married couples.

Jones v Kernott - the background information

The Jones v Kernott case concerned the rights of Leonard Kernott
and Patricia Jones and their entitlement to a £245,000
property which they bought in Essex in 1985. Ms Jones paid
£6,000 from her own funds with the remainder being funded
through a mortgage.

Ms Jones paid the property outgoings including the mortgage and
the bills, whilst Mr Kernott paid for some improvements to the
property.

The couple split up in 1993. Mr Kernott moved out and made no
further financial contributions to the property or to the family
home. The couple cashed in a joint life insurance policy and
divided the proceeds, which enabled Mr Kernott to purchase his own
home in 1996.

In 2006, some 13 years after they had separated, Mr Kernott
decided to seek repayment from Ms Jones for his share of the
property. As a result, Ms Jones started legal proceedings to obtain
a declaration that she owned the entire beneficial interest.

It was recognised that the couple owned the property equally at
the point of their separation, but Ms Jones argued that Mr
Kernott's beneficial interest had reduced due to his lack of
financial contribution since moving out.

Court decisions

The County Court and High Court both agreed that Mr Kernott was
entitled to just 10 per cent of the property value. This decision
was based on the couple's financial arrangements during the
time they were apart.

However, this was then overturned by the Court of Appeal, which
ordered a 50/50 share on the basis of the original agreement.

Joint equity presumption

The Court of Appeal based their decision on the earlier case of
Stack v Dowden [2007] UKHL 17. This previous case recognised
that, in the absence of any evidence to the contrary, where people
purchase a family home in their joint names the presumption is that
they intend to own the property jointly in equity also.

Because Ms Jones and Mr Kernott had never talked about how they
held the property, or drawn up a document indicating the same, the
Court of Appeal felt that the presumption that there was an equal
entitlement had not been overcome. Furthermore there was no
evidence to prove the parties' joint intentions had changed
after their separation.

The Supreme Court ruling and the possibility of imputation

The Supreme Court judges were unanimous in allowing the appeal
and restoring the order of the earlier County Court Judge. As
such, the beneficial interest was split 90/10 in favour of Ms
Jones.

The judgement applied the following principles:

(i) The starting point where a family home is bought in joint
names is that the parties own the property as joint tenants in law
and equity

(ii) That presumption can be displaced by evidence that their
common intention was, in fact, different, either when the property
was purchased or later.

(iii) Common intention is to be objectively deduced (inferred)
from the conduct and dealings between the parties.

(iv) Where it is clear that they had a different intention at
the outset or had changed their original intention, but it is not
possible to infer an actual intention as to their respective
shares, then the court is entitled to impute an intention that each
is entitled to the share which the court considers fair having
regard to the whole course of dealing between them in relation to
the property.

(v) Each case will turn on its own facts; financial
contributions are relevant but there are many other factors which
may enable the court to decide what shares were either intended or
fair.

Supreme Court ruling implications

As such the decision in Jones v Kernott case confirms that if
the courts find that the intentions of the parties have changed
since they bought the property, then they can imply a further
alteration to the shares that they own in the property.

Furthermore, the courts have stated that whilst their primary
aim is to ascertain the actual intentions of the parties, whether
expressed or inferred, if it is not possible to do so then the
court "is driven to impute an intention which the parties may
never have had". Therefore in cases where intention is not
known the court can still make what it believes is a fair
decision.

Reason behind the Supreme Court decision

In the Jones V Kernott case, there was no need for the court to
impute an intention to the parties, as the trial Judge had made a
finding that the intentions of the parties had changed after
separation. The main factor behind this being that the property was
no longer required to be the family home it was initially intended
to be. In addition Mr Kernott's interest in the property ceased
when he bought his own house in 1996.

What does this mean for cohabiting couples?

Partner at Hugh James solicitors Matthew Evans commented
"Marriage break-ups are covered by extensive legislation
and case law and so married couples who seek advice about
entitlement to property and financial matters can usually get
reasonably clear advice about where they stand. The law for
divorcing couples allows the court to consider all the
circumstances and then do what is fair. However, the same cannot be
said for cohabiting relationships."

Many commentators are calling for statutory reform in this area
of law and want laws to be introduced by Parliament which govern
the relationships of unmarried couples and provide them with
financial remedies should the couple separate. Scotland has already
introduced such laws, but until this happens in England and Wales
there may well be many more cases like the Jones V Kernott.

In 1985 when Ms Jones and Mr Kernott bought their house, it was
commonplace to buy a property jointly without an express
declaration of trust. Nowadays, where a property is bought in joint
names, joint owners are required to indicate how they wish to hold
their property. Therefore disputes in respect of beneficial
interests will inevitably reduce over time.

However, the situation Ms Jones and Mr Kernott faced could still
be a possibility for thousands of older couples who do not benefit
from the updated conveyancing practices which are now in place.

Couples should therefore not assume that the legal pieces of
paper that show co-ownership of a property are the end of the
story.

Prepare a simple declaration

In light of the Supreme Court decision, couples should probably
prepare a simple declaration of trust explaining how they want to
own a co-purchased property.

Review declaration following changes in circumstances

Should there be a change in a couple's circumstances then
they should review their initial declaration. This will avoid a
judge at a later stage deciding on what he/she is fair.

Get legal advice

Unmarried couples who buy property together should probably take
legal advice before they buy a property, take legal advice if they
split up, and if they do not want to end up like Ms Jones and Mr
Kernott they would be wise to put their intentions in writing in a
deed of trust.

Matthew Evans continued "Most people will not believe
that they need to take these steps to protect themselves. Unlike
wills or pre-nups there is a general lack of awareness surrounding
the right of cohabitants, for example the urban myth of rights and
entitlements for common law spouses is surprisingly still
prevalent. Taking these simple precautions could well save
thousands of pounds in legal fees and years of heartache whilst you
wait for a decision."

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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